Cocoa futures soared some 7 percent on Tuesday on a burst of short-covering that triggered automatic buy orders, while ICE sugar tiptoed up on concerns about delays in Brazil's harvest, as both markets hit their highest levels since mid-November. Coffee reversed course to trade higher, consolidating after Monday's 3 percent drop in which investors liquidated long positions.
March cocoa futures on ICE surged $144, or 6.3 percent, to close at $2,413 a tonne, the highest close for the spot contract since November 14 and just off the session high of $2,420. "Concern about available supplies is helping prices, and as traders cover shorts with the market breaking out above last week's highs," said Derrick Lewis, vice president of brokerage Cleartrade Commodities in Chicago. The close above $2,400 per tonne could set the stage for some follow-through buying, said Bill Raffety, senior analyst for futures brokerage Penson Futures in New York.
"I would think traders who put something on will look for a test back tomorrow and then add to the long side if the underlying support remains," Raffety said. Liffe March cocoa futures finished up 101 pounds, or 6.8 percent, to finish at 1,584 pounds a tonne. "The risk of damage has receded, because the weather has improved. There's been much needed rains over the past few days, and I'm not aware of anyone who's seen a real deterioration in mid-crop prospects," said a European commodities fund analyst.
Demand for cocoa, the key ingredient in chocolate, is widely expected to surpass supply in the current crop year, helping prices to recover some of the ground lost last year, a Reuters poll of 20 analysts and dealers showed. The poll forecast a global 2011/12 cocoa deficit of 100,000 tonnes, and the market rallied shortly after the data was released.
Ivory Coast continued to push ahead with its cocoa sector reforms, appointing former agriculture minister Lambert Kouassi Konan as chairman of the new cocoa marketing and stabilisation body, the CCC. Raw sugar futures inched up to their highest level since November 14 as dealers eyed weather in top producer Brazil for signals of when harvest might begin.
"Weather-related concerns about the new crop in South Brazil and a possible slow start to the crush have supported the market, but I think it's far too early for those concerns," said James Kirkup, head of sugar brokerage at ABN Amro Markets. March raw sugar futures on ICE rose 0.17 cent to 25.13 cents a lb by 12:36 pm EST (1736 GMT), just below the 2-1/2 month peak of 25.20 cents hit earlier in the session. "Sugar's got nowhere to go," said The Price Group senior analyst Jack Scoville.
Brokers said cash offers seem to have slowed down and raws could stay around its current levels for now. The March contract traded at a 0.69 cent per lb premium to May, having widened from 0.51 cents a week ago. London March white sugar futures were up $1.00 at $657.70 per tonne. Benchmark March arabica coffee futures on ICE were up 0.95 cent at $2.1945 per lb. March robusta coffee on Liffe was up $10 at $1,889 a tonne.
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